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Agri Exim Limited v Uganda Revenue Authority [2025] UGTAT 16

Tribunal · 2025 Application Granted AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application challenging the Respondent's decision to disallow the Applicant's claim for initial allowances on an industrial building
Decision
Assessment set aside; Applicant entitled to claim initial allowances

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The Tribunal held that the Applicant was entitled to initial allowances under Section 27A of the Income Tax Act. Buildings purchased and renovated to change their primary use from warehousing to manufacturing qualify as industrial buildings. The phrase 'placed in service for the first time' means first use in the taxpayer's business, not first use ever. The 30% deposit requirement did not apply where the taxpayer had carried-forward tax losses that would absorb any assessed tax. Application allowed.

Outcome

Assessment set aside; Applicant entitled to claim initial allowances

Facts

In November 2018, Agri Exim Limited purchased eight warehouses and an office building from Lexman Ltd for USD 3,595,000. The buildings had previously been used by Lexman as warehouses and offices. After purchase, Agri Exim carried out extensive renovations, including constructing a laboratory, extending the building, and installing machinery to adapt the premises for manufacturing sunflower oil, soy products, and other agricultural goods. The Applicant obtained certificates from KCCA and NEMA and commenced manufacturing operations in 2019. The Applicant claimed an initial allowance of Shs. 3,275,767,400 under Section 27A of the Income Tax Act. The Uganda Revenue Authority disallowed the claim on the grounds that the building was not new and had previously been used by Lexman Ltd. The Applicant challenged this decision before the Tax Appeals Tribunal.

Issues

  1. Whether the Applicant is entitled to claim initial allowances under Section 27A of the Income Tax Act on buildings purchased from Lexman Ltd and subsequently renovated for manufacturing purposes.
  2. Whether buildings previously used as warehouses and offices, but converted to manufacturing use by a new owner, qualify as 'industrial buildings' for purposes of initial allowances.
  3. Whether the phrase 'placed in service for the first time' in Section 27A(4) of the Income Tax Act refers to first use by the taxpayer or first use ever.
  4. Whether the Applicant's failure to pay 30% of the tax in dispute bars the application under Section 15 of the Tax Appeals Tribunal Act.

Orders

  • Application allowed.
  • The Respondent's assessment disallowing initial allowances is set aside.
  • The Applicant is entitled to initial allowances of Shs. 3,275,767,400.
  • Costs awarded to the Applicant.

Rules and key headnotes

Tax Law — Initial Allowances — Industrial Buildings — Meaning of 'Industrial Building'
An industrial building for purposes of initial allowances under Section 27A of the Income Tax Act is determined by its primary use. A building previously used as a warehouse or office becomes an industrial building when its new owner changes its primary use to manufacturing operations, even if the building was an approved commercial building in the hands of the previous owner.
Tax Law — Initial Allowances — 'Placed in Service for the First Time' — Interpretation
The phrase 'placed in service for the first time' in Section 27A(4) of the Income Tax Act means first use in the taxpayer's business, not first use ever. A taxpayer who purchases a building previously owned and used by another taxpayer is entitled to initial allowances when the taxpayer places the building into service for the first time in the taxpayer's own business, regardless of whether the previous owner claimed initial allowances.
Tax Law — Initial Allowances — Conversion of Use — Renovations and Machinery Installation
Where a taxpayer purchases buildings previously used for warehousing and offices, and carries out extensive renovations including constructing a laboratory, extending the building, and installing machinery to convert the premises for manufacturing operations, the buildings qualify as industrial buildings placed in service for the first time by that taxpayer for purposes of claiming initial allowances.
Tax Law — Initial Allowances — Approved Commercial Buildings — Exclusion
Section 27A(3) of the Income Tax Act excludes approved commercial buildings from the definition of industrial buildings eligible for initial allowances. An approved commercial building is one primarily used as an office, warehouse, or commercial storage facility. The test is the building's primary use at the relevant time, not its historical use.
Tax Law — Tax Appeals — 30% Deposit Requirement — Applicability Where Taxpayer Has Carried-Forward Losses
The requirement under Section 15 of the Tax Appeals Tribunal Act to pay 30% of the tax in dispute does not apply where the taxpayer has historical carried-forward tax losses that would absorb any tax assessed by the revenue authority, such that no tax would be payable even if the appeal were dismissed.
Statutory Interpretation — Commissioner General's Practice Notes — Interpretive Value
A Practice Note issued by the Commissioner General clarifying the meaning of a statutory phrase is a relevant interpretive aid. Where the Income Tax Act does not explicitly define 'placing an item into service for the first time', the Commissioner General's Practice Note clarifying that the phrase means first use in the taxpayer's business is persuasive authority.

Legislation cited (9)

Cases cited (3)

  • Umeme Ltd and Another v Uganda Revenue Authority (TAT Application No. 40 of 2018)
  • Commissioner of Domestic Taxes v Dodwell and Company (EA) Limited (Income Tax Appeal No. E152 of 2020)
  • Amalgamated Society of Engineers Vs Adelaide Steamship (1920) 28 CLR 129 at 161-2

Full judgment

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Agri Exim Limited v Uganda Revenue Authority 2025 UGTAT 16 (10 July 2025)
Source: this page presents Wakilii’s issue analysis and metadata for a publicly reported Ugandan judgment. Any AI-generated summary is marked as such. Judgment text is sourced from the Uganda Legal Information Institute (ulii.org). Wakilii is not affiliated with ULII.